TV presenter Kelly successfully appealed a £1.2m tax bill for engagements with ITV breakfast programmes covering the period September 2012 to July 2017.

In the ruling Judge Jennifer Dean concluded that control was the key factor. “The level of control falls far substantially below the sufficient degree required to demonstrate a contract of service and we are satisfied that the factors strongly indicate that the contract was one for services.” 

And she went on to draw a distinction between an actor on the stage and Kelly’s working arrangements. “The actor is required to follow a script, wear the clothes chosen for the production and move around the stage as directed. In contrast, Ms Kelly has considerably more control over her performance.”

Graham Fisher, group CEO at Orange Genie, told Recruiter that the big lesson for HMRC was the need to take an holistic approach with IR35 rather than to focus on one thing and say that makes someone an employee. Fisher said that in this particular case, “there are a whole series of facts that if anyone who looked at it in any other way than to raise taxes, I think they would be saying ‘this case shouldn’t be going ahead’…”.

Fisher said there were a number of clear factors to indicate that Kelly wasn’t an employee but that she demonstrated a degree of independence that is not normally associated with being an employee.

These included taking the risks of having no sick pay and paying her own pension, no guarantee of follow-on contracts (mutuality of obligation), having her own brand  and generally “taking control of what was going on”. He concluded: “All these facts demonstrate an independence that you would not normally see with an employee.”

Commenting on the tribunal decision, ContractorCalculator CEO Dave Chaplin said: “The ruling was a slam dunk for Ms Kelly, and it’s astonishing given the level of ultimate control she exercised that this one ever got to court. Not only would I not expect this to be appealed by HMRC, but there surely must be a case for wasted costs to be claimed.

The ruling was a slam dunk for Ms Kelly, and it’s astonishing given the level of ultimate control she exercised that this one ever got to court

“Ms Kelly was able to successfully appeal a significant and unsubstantiated tax bill. Unfortunately, many contractors who may be subject to a similar fate due to the off-payroll rules won’t have the finances or resources to do the same.”

Julia Kermode, CEO of The Freelancer & Contractor Services Association (FCSA), whose members provide professional support services to freelancers and contractors, said: “Individuals choosing to be self-employed are in a very different position of security to someone who is a permanent employee, with all the accompanying statutory rights and benefits. We dispute that personal services companies (PSCs) are a mechanism to avoid tax; they are a perfectly legitimate way of someone being in business on their own account.

“It is essential that HMRC does not penalise everyone working through PSCs in a blanket fashion, as they bring much-needed flexibility to both the freelancer and businesses that engage them on a short-term basis. HMRC needs to stop treating people that choose to work through PSCs as serial tax avoiders because their record of IR35 cases clearly shows that this is simply not the case, and the majority are working legitimately for themselves.”

An HMRC spokesperson said: “We are disappointed that the First Tier Tribunal has decided that the intermediary rules (also known as IR35) did not apply in this case.

“We will carefully consider the outcome of the tribunal before deciding whether to appeal.”

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